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FTSE 100 flat as Fevertree loses a bit of fizz, Apple slips on TV unveil

It’s been a mixed start for markets in Europe this morning, after yesterday’s weak session, with Asia markets having a much steadier day with the Nikkei 225 enjoying a decent rebound after a weak start to the week. US markets also underwent a mixed session finishing more or less flat after initially opening lower.

Apple shares finished the day lower for the second day in a row after the big unveil of a new TV streaming service, as well as a new credit card and news service. The most anticipation surrounded the new TV streaming service and it was a little anti-climactic. Despite a star-studded line up, as a Netflix killer it was a little underwhelming, however from little acorns do big oaks grow, and there is a chance it could grow in popularity over time.

There was little indication of any unique selling point that would set it apart from Netflix, or Amazon for that matter, and given the growing popularity of the so-called cord cutting, when it comes to cable, the sheer volume of choice will still run into the inevitable road block of customer limitations. As it is in the UK we have Sky, BT and Virgin Media, along with Now TV, as well as the add-ons that come with smart TVs which include HBO, Starz Player, and Disney among others. This means there will be a critical mass of people who will be able to afford the luxury of paying for more than two or three different subscription services, even with a monthly cost of around $10 a month. Both Netflix and Amazon shares finished the day higher, suggesting that neither one of them has much to worry about at the moment.

It’s been another successful year for Fevertree, a true British success story, and a company that has turned into one of the leading exporters and producers of carbonated mixers. Full-year revenue rose 40% to £237.4m, coming in above expectations of previous guidance of £236m, and up from £170.2m last year.

UK revenue rose 53% with revenues of £134.2m as the growing popularity of gin as the tipple of choice helped drive sales with the Wine and Spirit Trade Association reporting earlier this year that 66m bottles of gin were sold in 2018, a rise of 41%. The football World Cup and long hot summer also helped sales with the extended range of 'Refreshingly Light' mixers helping drive sales. The acquisition of US-based Southern Glazers wine and spirits has also helped boost profits, pushing revenues up sharply compared to 2017, as the transition to the Fevertree USA brand sets the company up to boost sales across the US.

Profit margins did decline modestly from 53.5% to 51.8% but that is probably down to transition costs in its US operation., and this may explain why the shares have drifted lower on the open.

Irn-Bru maker AG Barr also reported its full year results with revenues rising 5.6% to £279m, while profits before tax increased by 2.5% to £45.2m. the sale of Irn-Bru sugar free variants appear to be gaining in popularity and now account for 40% of the total brand. The company announced an increase in the dividend of 7%, and a total dividend of 16.64p a share.

On the outlook the company was much more cautious due to concerns over increased regulation, as well as changing customer tastes.

Having signed deals with US based Kroger’s, and Canada’s Sobeys in the last two years Ocado has continued its international expansion programme by partnering with Australian supermarket chain Coles to develop its on line grocery platform. Coles is one of Australia’s biggest supermarkets turning over A$39.4bn in 2018, with Coles agreeing that Ocado will operate two of its main operations in Melbourne and Sydney.

International plumbing group Ferguson shares have been clobbered this morning, after the company warned that its full year trading profit would be at the lower end of guidance, just below $1.6bn. First-half revenue came in at $10.85bn, helped in part by the exit of its Dutch plumbing and heating business, which generated $255m in cash.

While the US operation looked strong it was notable that growth in its Canada and UK markets was a little on the weak side.

The pound has continued to absorb most of the political paralysis coming from MPs at Westminster, as headline fatigue starts to become more entrenched amongst currency traders. Last night’s vote by MPs to try and arrive at a middle road may well have shifted the political calculus when it comes to an eventual Brexit outcome, however it still hasn’t changed the binary nature of any possible outcome which remains “no deal” or a revocation of article 50.

US markets look set to open higher this morning, after the rebound in the Nikkei 225 overnight, as investors weigh up what bond markets are telling us about the overall economic outlook, and the prospects for future valuations.


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